Imports. Exports. T135 Figure 18-1 U.S. Exports and Imports as Ratios of GDP, Ratio to GDP

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1 T135 Figure 18-1 U.S. Exports and Imports as Ratios of GDP, Imports 0.10 Ratio to GDP Exports

2 T136 Table 18-1 Ratios of Exports to GDP for Selected OECD Countries, 1997 Export Ratio Export Ratio Country (%) Country (%) United States 12 Switzerland 40 Japan 10 Austria 38 Germany 23 Belgium 73 United Kingdom 29 Luxembourg 91 Source: International Financial Statistics, IMF, April 1999.

3 T137 Figure 18-2 The Nominal Exchange Rate, Appreciation, and Depreciation: Germany and the United States (from the Point of View of the United States) From the point of view of United States looking at Germany Nominal exchange rate E Price of DM in terms of dollars Appreciation of the dollar Price of dollars in DM increases Price of DM in dollars decreases Exchange rate decreases: E Depreciation of the dollar Price of dollars in DM decreases Price of DM in dollars increases Exchange rate increases: E

4 T138 Figure 18-3 The Nominal Exchange Rate between the DM and the Dollar, DM in terms of dollars

5 T139 Figure 18-4 The Construction of the Real Exchange Rate Price of German goods in DM P* Price of German goods in dollars EP* Price of U.S. goods in dollars P Real exchange rate EP* P

6 T140 Figure 18-5 The Real Exchange Rate, Real Appreciation, and Real Depreciation: Germany and the United States (from the Viewpoint of the United States) From the point of view of United States Looking at Germany Real exchange rate Price of German goods in terms of U.S. goods Real appreciation Price of U.S. goods in terms of German goods increases Price of German goods in terms of U.S. goods decreases Real exchange rate decreases: Real depreciation Price of U.S. goods in terms of German goods decreases Price of German goods in terms of U.S. goods increases Real exchange rate decreases:

7 T141 Figure 18-6 Real and Nominal Exchange Rates Between Germany and the United States, Real exchange rate, Nominal exchange rate, E

8 T142 Table 18-2 The Country Composition of U.S. Merchandise Trade, 1998 Exports to Imports from Countries $ Billions Percent $ Billions Percent Canada Western Europe Japan Mexico Asia* OPEC** Others Total *Not including Japan. **OPEC: Organization of Petroleum Exporting Countries. Source: Survey of Current Business, April 1999.

9 T143 Figure 18-7 The U.S. Multilateral Real Exchange Rate, Index (1992=1.0)

10 T144 Table 18-3 The U.S. Balance of Payments, 1998, in Billions of U.S. Dollars Current Account Exports 931 Imports 1100 Trade balance (deficit ) (1) Investment income received 242 Investment income paid 265 Net investment income (2) Net transfers received (3) Current account balance (deficit ) (1) (2) (3) Capital Account Increase in foreign holdings of U.S. assets 542 Increase in U.S. holdings of foreign assets 305 Net increase in foreign holdings/(net capital flows to the U.S.) 237 Statistical discrepancy 4 Source: Survey of Current Business, April All numbers in billions of dollars.

11 T145 Figure 18-8 Expected Returns from Holding One-Year U.S. or German Bonds Year t Year t 1 U.S. bonds $1 $(1 i t ) German bonds $1 $ ( 1 ) Et * (1 i t ) E e t 1 DM ( 1 ) E t DM ( 1 ) E t * (1 i t )

12 T146 Figure 18-9 U.S. and German One-Year Nominal Interest Rates, U.S. interest rate 14 Interest rate, i (percent) German interest rate